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Reply to Buchanan

Some Initial Reactions to James M. Buchanan’s Suggested Constitutional Amendments

Professor Buchanan offers lots of food—a veritable feast—for thought. But I find much of it unappetizing.

Start with his fiscal responsibility amendment: Unless three-fourths of each congressional house votes otherwise, Congress must “restrict estimated spending to the limits imposed by estimated tax revenues.” Professor Buchanan says that this amendment “would exert a major impact on world attitudes” and strengthen the dollar. Now, I am not an expert on this topic (to put it mildly). But I do wonder whether there is evidence that other countries have in fact adopted fiscal responsibility provisions closely akin to the one Buchanan proposes, and that these countries have indeed been rewarded by world financial markets? If so, I should like to see the evidence.

Long study of America’s Constitution has taught me to pay careful attention to the details—the specifics, the numbers—in the document, and I have real doubts about the specifics of the Buchanan proposal. I can envision many scenarios where a wise government might need to spend more than it taxes. (For what it’s worth—rather a lot, I think—George Washington and Alexander Hamilton agreed with me on this.) Wars may require massive expenditures and large-scale borrowing. Other capital expenditures—like the Panama Canal—may also be superb long-term investments even if they result in immediate negative cash flow. But the Buchanan amendment is very crude: it measures only immediate flows rather than trying to separate current expenditures from long-term expenses/investments that should be budgeted separately.

Of course, the amendment does not absolutely bar deficit spending: it merely requires an extraordinary supermajority of each house. But does Buchanan understand how truly high he has set the bar? A president’s veto may be overridden by a mere two-thirds of each House, yet for the Constitution’s first 75 years, Congress never succeeded in clearing even this bar to overcome a presidential veto on a major bill. True, my override data derives from situations where the president is opposed to Congress, whereas the three-fourths proposal is indifferent to the president’s attitudes. But this only highlights another odd feature of the proposal. Is fiscal responsibility well served by, in effect, cutting the president out of the deficit-spending process? (I might have thought that a public choice theorist might champion the President—as a continentally elected figure—as an important counterweight to locally elected legislators seeking local pork projects.)

And if deficit spending is imperatively necessary—thanks to a war or a huge exogenous shock (say, an unprecedented series of massive natural disasters)—a three-fourths rule might actually worsen the problem by increasing the leverage of a small minority in Congress who can insist that their pet projects be added to an omnibus bill. The Articles of Confederation featured a strong supermajority requirement for necessary government action, and this system failed miserably. And the framers understood that increasing the requirement for passage of certain types of bills could in theory create the potential for more pork, not less. As Franklin pointed out at the Philadelphia Convention: “The negative of the [colonial] governor [of Pennsylvania] was constantly made use of to extort money. No good law whatever could be passed without a private bargain with him. An increase of his salary, or some other donation, was always made a condition.” Similarly, giving a mere quarter of each house an absolute “negative” veto on vitally needed deficit spending might well enable an irresponsible legislative faction to “extort” (to use Madison’s word from Philadelphia) the forces of good government.

I do not say this will happen or is even likely to happen. But given that it might happen—that raising the voting bar might end up resulting in more useless pork, not less—then it would be useful to have some actual data from American or world history to support the three-fourths idea.

Note, finally, that there is considerable imprecision not merely in the idea of “estimated”—as opposed to actual—spending and tax revenues, but also in several other variables in the Buchanan formula. How should we count a government promise to spend all sorts of money in future years, if the promise does not cost us anything in the current budget period? Will the government be induced into all sorts of false economies by leasing short-term (thus decreasing current expenditures) rather than buying long-term in cases where buying is ultimately far more frugal? Are user’s fees to be counted as taxes? How about sales of government assets—from fighter planes to western lands? The huge gap between the ordinary rules of legislative majorities and the super-high bar of three-fourths may create all sorts of possibilities for legislative legerdemain. Once again, it would be helpful to have actual case studies of how rules similar to the one Buchanan proposes have in fact operated.

As for Buchanan’s proposed nondiscrimination amendment: What, exactly, is this trying to add above and beyond existing Equal Protection Clause doctrine? A constitutional amendment must take a form of words, and I am not clear whether Buchanan means to endorse the precise formula that Hayek put forth. Before we go around monkeying with the Constitution, I should think we should carefully study the Constitution that we already have. But Buchanan’s rather confusing observations about our existing Constitution make me nervous. He alludes to the Constitution’s tax “uniformity” clause; but contrary to the thrust of his analysis, this was not the clause whose judicial interpretation prompted the need for an income tax amendment. Rather, it was a clause about “direct” taxes and “apportionment” that was interpreted—I would say, grossly misinterpreted—by the 1890s Court in a manner that prompted the Sixteenth Amendment. In fact, the Founding-era Court explicitly upheld a luxury (i.e., progressive/“discriminatory”) tax on carriages in the 1790s—in a sensible decision that the 1890s Court essentially repudiated.

It is formally true that the Sixteenth Amendment does not “stipulate rates of taxes,” but Americans adopted this amendment fully understanding that all previous income taxes in America had been—and that all future income taxes were likely to be—progressive in structure, with some combination of high exemptions and sloping rates. Buchanan’s proposal—which apparently constitutionalizes a regime that prohibits even a standard deduction (say, for income below the poverty line)—marks a truly radical break with American constitutional history. (It is also worthy of mention that, in the 1860s, the emancipation of slaves—which occurred without compensation even to loyal masters in loyal states—effected a massive redistribution of a sort that might seem to violate Buchanan-style “nondiscrimination.”) I take it that aid to impoverished orphans also might run afoul of nondiscrimination as Buchanan understands the term. If so—if this is even a close question or a plausible reading of the Buchanan idea—then I think this proposal needs to go back to the drawing board for careful rethinking and redrafting.

As for the third proposal—regarding “natural liberty”—this seems, contra Buchanan, rather more “substantive” than “procedural” as constitutional lawyers and judges use these terms. Has such a constitutional proposal ever been adopted and enforced in any American state—or anywhere else in the free world? It goes very far beyond what the Lochner Court did in its heyday. How would such a principle work in practice? For example, would it prohibit the government from banning private sales of arms to an enemy government in a time of declared war? How about sales of nuclear material to eager buyers? So here, too, I think there is a need to go back to the drawing board.

Also from This Issue

Nobel laureate James M. Buchanan argues that the Constitution should include amendments requiring a balanced budget, forbidding discrimination in outlays, and guaranteeing the natural liberty to exchange within and across our borders. “The ‘regulatory state’ has not worked,” Buchanan writes. “Abandonment of its constitutional legitimacy offers a starting point for constructive dialogue.”

Judge Alex Kozinski of the United States Court of Appeals for the Ninth Circuit maintains that an America that would ratify Buchanan’s proposed amendments would be an America that didn’t need them. They may not be the best ideas even if feasible, he argues. Under the nondiscrimination amendment, Kozinski predicts, “we’d have Bush v. Gore going on 365 days a year, all over the country.”

Cato Institute chairman William A. Niskanen agrees with Buchanan about ends, but disagrees about means. Niskanen offers fixes for Buchanan’s amendments and sets forth three tantalizing alternative amendments: have state legislatures – once again – elect U.S. Senators, allow the states to nullify federal law, and allow states to secede.

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